Sig Plc · LSE:SHI
Sig — H1 2020 Earnings Presentation
29 slides from Sig's earnings presentation, Sep 24, 2020
Slide 1: Successful recapitalisation provides foundation for new growth strategy
Successful recapitalisation provides foundation for new growth strategy Results for the six months ended 30 June 2020 24 September 2020
Slide 2: Today's presenters
Today’s presenters Steve Francis Ian Ashton Chief Executive Officer Chief Financial Officer 2
Slide 3: H1 2020 summary
H1 2020 summary • Significant Covid-19 impact on sales and profit in H1, although less than initial internal estimates • Trading has continued to improve over the summer period and is now trading stably under relevant Covid-19 protocols • Successful equity raise of £165m and restructuring of the Gro
Slide 4: Return to profitable growth – back to basics
Return to profitable growth – back to basics Become winners again by reinforcing Proximity, Expertise, Service 1 2 3 4 5 6 7 Sustainable Branch Sales & Superior Closer to High Expansive behaviours focus customer expertise suppliers & productivity vision focus markets Our people should Build Strength
Slide 5: Our growth plan
Our growth plan UK: restore expertise, refocus on branches; Revitalise Germany and continue to reconnect with customers and suppliers grow our other strong EU businesses 1/3rd 2/3rds Structurally our markets have positive drivers of recovery and growth in the medium term and our franchises and marke
Slide 6: Financial review of the period
Financial review of the period Ian Ashton Chief Financial Officer 6
Slide 7: Key financials
Key financials H1 H1 • LFL sales down 23.9%, principally due to Covid-19 2020 2019 Change impact across all markets; also continuation of the Revenue £818m £1,072m £(254)m weakening trend seen in Q4 2019 in UK and to a lesser extent Germany LFL sales (23.9)% (5.4)% n/a Gross profit £203m £271m £(68)
Slide 8: Revenue change by business unit
Revenue change by business unit £188m £180m £37m £20m £15m £2m £1,260m Above figures include estimated Covid-19 impacts of: £1,072m £818m £95m £43m £12m £18m £1m H1 2019 Portfolio H1 2019 UK France Germany and Ireland Poland H1 2020 underlying changes* underlying Benelux underlying as reported rebas
Slide 9: Gross margin and operating costs
Gross margin and operating costs • H1 2020 gross margin of 24.8%, 50bps lower than H1 2019 Gross margin • Gross margin decline principally due to reduced sales volumes in key 25.3% 26.2% 25.3% markets driving lower levels of rebates receivable 24.8% 24.0% • UK Distribution further impacted by the co
Slide 10: Profit before tax
Profit before tax £17m £64m £(54)m £4m £4m £1m H1 2019 Volume Mix/ Operating Interest H1 2020 price costs • Gross profit reduction of £68m, with reduced sales volumes leading to lower rebates and related margin impact • Small year on year increase in operating costs of £4m • Reduction in interest co
Slide 11: Other items – continuing operations
Other items – continuing operations H1 2020 PBT Cash £m impact impact Amortisation of acquired intangibles (2.8) - Impairment charges (42.8) - Disposals/exits 1.5 (0.7) Net restructuring costs (3.5) (2.7) Investment in omnichannel retailing (4.1) (6.4) Non-underlying finance costs (12.0) (0.4) Costs
Slide 12: Working capital
Working capital £228m 12.0% Factoring: 200.0 £53m 10.0% £176m 8.0% 150.0 £53m £133m £122m 5.3% 5.3% £35m £13m 6.0% 100.0 5.7% £175m 4.8% 4.0% £123m £109m 50.0 £98m 2.0% - 0.0% H1 2019 H1 2019 H2 2019 H1 2020 as reported rebased WC Factoring (chart) Working capital as % of sales • Working capital inc
Slide 13: Net debt (pre IFRS 16)
Net debt (pre IFRS 16) £11m £8m £152m £163m £1m £14m £13m £15m £22m £90m £41m FY Loss on Release of Net proceeds Cash outflow Working Reduction in Capex Interest/ Other H1 2019 modification restricted from from capital* debt factoring Tax/Other items 2020 of PPNs cash disposals trading • Net debt im
Slide 14: Stronger capital structure
Stronger capital structure Revised debt structure Equity raise • Total of £165m of capital raised Structure Draw down Date of 30 Jun 31 Aug 30 Jun 31 Aug £'m expiry Denomination 2020 2020 2020 2020 Private placement notes 2023 - 2026 EUR/USD 187 138 187 138 • Fees associated with the raise totalled
Slide 15: Outlook
Outlook • Market fundamentals remain sound, but there remains significant economic uncertainty in the short term • Compared to initial estimates of possible Covid-19 impact, trading was better than anticipated in H1, and full year 2020 sales are now expected to be moderately higher than previously g
Slide 16: Current trading and strategic update
Current trading and strategic update Steve Francis Chief Executive Officer 16
Slide 17: Trading activity – Group
Trading activity – Group Revenue Gross margin 89% 94% 89% 81% 87% of Prior 89% Year 63% 26.2% 46% 25.3% 24.8% Jan Feb Mar Apr May Jun Jul Aug H1 2019 H2 2019 H1 2020 2019 2020 • Lockdown severely impacted UK, Ireland and France businesses with Group revenues 36% down in March and April • Revenue imp
Slide 18: Trading activity – EU
Trading activity – EU Revenue 105% 93% 98% 86% 97% 79% 97% 68% Jan Feb Mar Apr May Jun Jul Aug 2019 2020 • Trading activity suffered a temporary setback in France following the temporary closure of all branches mid -March, with the average daily sales reducing to c50% year on year • France revenues
Slide 19: Trading activity – UK
Trading activity – UK Revenue 82% 76% 74% 74% 80% 77% 39% 13% Jan Feb Mar Apr May Jun Jul Aug 2019 2020 • During the lockdown period, UK revenues reduced to as low as 13% of 2019 revenue in April. The businesses remained open to service critical and emergency projects only • Trading recovered gradua
Slide 20: UK market share recapture plan
UK market share recapture plan Facilitate growth Energise sales Merge leadership 1 2 through better 3 and market share of UK businesses operations recovery Restore Expertise; Refocus on Remove Blockages to Growth Reconnect with Customers & Branches • Give permission, de-centralise, reduce Suppliers
Slide 21: The Group's medium term financial targets
The Group’s medium term financial targets • Target an operating margin of approximately 5% within the Group’s operating companies Margin • Group operating margin of approximately 3%, trending towards approximately 5% in the longer-term Leverage • Headline Financial Leverage of <1.5x Dividend • Divid
Slide 22: Summary
Summary Equity raise and debt restructuring completed Covid-19: resilience and adaptability minimises impact – thanks to our people Return to Growth strategy progresses to plan Steady trading and strong liquidity position Foundations in place for delivery – medium term expectations remain unchanged
Slide 23: Questions
Questions 23
Slide 24: Appendix: Supporting schedules
Appendix: Supporting schedules
Slide 25: Underlying financials by segment
Underlying financials by segment Operating Operating UK Revenue Change LFL Gross margin Change Change Change profit margin UK Distribution £155m (47.5)% (47.5)% 22.9% (200)bps £(27.4)m £(34.2)m (17.7)% (2,000)bps UK Exteriors £104m (27.5)% (27.5)% 27.2% (170)bps £(8.9)m £(14.0)m (8.5)% (1,210)bps To
Slide 26: Impact of divestments and closure of non-core businesses
Impact of divestments and closure of non-core businesses Underlying Underlying revenue PBT As reported at H1 2019 results £1,260.1m £27.3m Businesses identified as non-core in 2019: Building Solutions (National) Ltd £(28.4)m £(1.6)m Maury £(0.9)m £0.3m Discontinued operations: Air Handling £(159.3)m
Slide 27: Number of trading sites
Number of trading sites 31 Dec Closed/ 30 Jun 2019 merged 2020 UK Distribution 44 (1) 43 UK Exteriors 110 (1) 109 Total UK 154 (2) 152 France Distribution 38 - 38 France Exteriors 108 - 108 Total France 146 - 146 Germany 51 51 Benelux 15 - 15 Total Germany and Benelux 66 - 66 Ireland 9 - 9 Poland 43
Slide 28: Definition of terms
Definition of terms Excludes businesses divested or closed, or which the Board has resolved to divest or close Underlying operations by 24 September 2020. Sales per working day in constant currency, excluding acquisitions and disposals completed Like-for-like (LFL) or agreed in the prior year, or be
Slide 29: Disclaimer
Disclaimer This presentation may include certain forward-looking statements, beliefs or opinions, including statements with respect to SIG plc’s business, financial condition and results of operations. These forward-looking statements can be identified by the use of forward-looking terminology, incl